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More cheer than gloom for Scotland amid UK difficulties



The Scottish private sector economy was the fourth-strongest performer among the 12 UK nations and regions in terms of its pace of increase in activity in January.

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Only London, the West Midlands and south-west England grew faster than Scotland last month, according to Royal Bank’s latest (purchasing managers’ index) report.

Scotland’s business activity index rose from 49.4 in December to 51.7 last month on a seasonally adjusted basis, jumping above the 50 mark deemed to separate expansion from contraction to indicate the first growth in six months.

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While a significant relief, especially given the dismal UK backdrop, it is far from plain sailing for the Scottish economy.

The rebound in private sector activity in Scotland last month was enabled by strong growth in services.

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This was heartening to see.

However, Scotland’s manufacturing sector recorded another sharp contraction.

The continuing growth in employment in Scotland’s private sector economy in January – which extended the run of increases to a year – was not surprisingly given the activity pattern driven by services.

Employment in the manufacturing sector north of the Border fell for the first time in four months.

Judith Cruickshank, who chairs Royal Bank’s Scotland board, noted the “imbalanced” nature of the nation’s growth.

She said: “The Scottish private sector recorded an uplift in activity at the start of the year. The upturn was the first seen in six months and solid overall. However, growth was imbalanced, centred solely at service providers who have shown resilience amid a subdued economic climate. Meanwhile, the manufacturing sector reported a further sharp deterioration.”

The survey did show that Scottish companies remain upbeat about their prospects, even if they are slightly less optimistic about the outlook for increased business activity on a 12-month horizon than they were in December.

Ms Cruickshank noted that “elevated inflation and interest rates as well as lingering economic uncertainty could undermine growth prospects”.

There are undoubtedly challenges ahead.

However, the latest PMI report on Scotland’s private sector provides more cheer than gloom, especially given the difficult UK economic conditions.

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